Friday 13 November 2015

Is the economic boom ending?

It always had to happen, as it always does. Normally the UK has operated on a 7 year economic cycle from boom to bust since the second world war, with a year or two's grace at either end. Of course, with the huge crash of 2008 (coming seven years after the dotcom bubble burst in 2001 when there was a recession in a few key areas of the economy, now overlooked), we would expect the resulting recovery to have a bit more legs left in it.

Certainly, a fall in input prices of oil and commodities should be very stimulative to the overall global GDP. But the World Bank has been cutting its forecasts. Post 2008 the main global growth engine was China which is now rapidly slowing down.

Closer to home, with debt levels still very high in both the public and private sector in the UK, there is no more room to stimulate demand. Housing supply shortages also drain money from more useful economic activity to pay rents instead. The biggest dove in the Bank of England is forecasting a reduction in UK economic activity

My own direct experience of the market at the moment is seeing management start to discuss the next downturn - be it one year or two years away. Certainly, when this happens in the past my experience is that it comes quicker than we think.

Having said that, in 2011 in the Euro Crisis the UK managed to avoid recession in the face of a calamitous external event and a big jump in Sterling. So, the die is not yet cast and perhaps a very shallow drop-off is on the cards for the UK, even if the likes of China and Brazil fair worse.

One thing I can't see though is how the UK will avoid a significant economic slow down before the next election; perhaps a window will open for Mr Corbyn after all? The state of the UK public finance is poor when faced with a renewed global slowdown.


Demetrius said...

Economic slowdown with complications from migration etc.; Cameron cockups; adverse events; with a touch of the odd disaster here and there and bob's your Jeremy.

Anonymous said...

When is it going to commence? Where is, the post 2008 economic boom?

A UK Public debt north of £1.5 trillion and that's without the public sector pensions liability thrown in, some auditors reckon the UK could be under, up to the tune of £7 trillion.

The 'growth' stats are BS and everyone knows it.

If...... if the drop in the prices of commodities and oil is factored and funny money pouring in from Russian crooks, dodgy Greek magnates and all manner of shady Europeans salting away €billions into London property, Chinese and Singaporean investors buying property off plan, yes there has been a 'boom' of sorts. Then add in millions of new arrivals since 2008 say 5-6 million - a conservative estimate - GDP is up but so fucking what?

I say what BOOM is it, can it be there, can someone point it out?

Gormless George, has cut not a lot - since 2008and for him 2010 most government departmental budgets have risen in real terms, ha, ha, ha!

Retrenchment? is a fucking illusion thus his [Osborne's] economic mismanagement is as bad as MacRuin. The public sector still recruiting, is yet enjoying a boom in wage inflation.
FFS, there is no sign of any supply side reforms - the idiot George and his merry green men go on driving offshore UK big industry by increasing taxes on the productive sector and the added insanity of a unilateral carbon floor price adds insult to the miserable woe - ask the Steel lads on Teesside and Scunthorpe!

Food producers and food purveyors continue to dupe the consumer by packaging goods in smaller sizes giving the illusion of stable prices. Too clever by half, it's a con of extraordinary proportions by the 'big four' but they are not challenged at all. Though, the customers [are not so daft] niffed the stink of these sharp practises and many have voted with their feet by purchasing their groceries at alternative discounting stores to the chagrin of big4 CARTEL; Tesco, Sainsbury's, ASDA and Morrisons.

£BoE's £350 billions of QE dumped funny money into the ether [nobody is really sure how it works] but we do know, that, it mostly vanished into equities and property. Yeah some rich slickers made a killing - don't they always? But the fundamental fissures and zombie economics remains virtually the same as it did post 2008 and the banks are as bust as ever.

We are living on a wing and mad mantras from economists who know not of what they waffle about, the whole shebang is way past due for a financial implosion, a calamity which will make 1929-33 seem like easy street.

As I say, boom? What............. blooming boom?

AndrewZ said...

Corbyn wouldn't benefit from an economic downturn because so few people would see him as offering any credible alternative. Indeed, most people would probably see Labour as likely to make things worse.

dearieme said...

Safety and Order will take precedence over pounds and pennies. Cameron may be a feeble twerp, but he and his haven't spent their careers brown-nosing terrorists, unlike the Corbynistas.

AndrewZ said...

In the 1970s the political class clung to the "post-war consensus" on economic issues while the public was steadily turning against it. I think we're now going through a similar process on all the issues that relate to national identity, such as immigration, the EU and multiculturalism. Public opinion is shifting but the political class is lagging behind. So I suspect that in retrospect Cameron will be seen much like Edward Heath, as someone who had electoral success but who was too conventional in his thinking to actually change the country's direction of travel.

Anonymous said...

@AndrewZ - "Public opinion is shifting but the political class is lagging behind."

But demographic change moves faster than public opinion or the political class. People don't generally spend much time checking the maternity department of their local hospital.

The Muslim population was about 2% in 2001, compound interest is a wonderful thing.